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Drop Shipping: Riches or Ruin? Part 2

The payoff can be big, if you follow these fundamental rules.

Our last article addressed the issues you’ll face as you consider working with dropshipping companies as your supply-chain management strategy. Many successful sellers we spoke with are decidedly against using drop shipping. Still, others have used it with success. In the end, whether you’ll want to give it a try has a lot to do with how risk-averse you are.

Personally, we still live with the concept that controlling things will ensure happy outcomes. Clearly that’s not always true, and sometimes a big risk can lead to a big payoff.

You’ll find your own level of comfort, but if you decide to give drop shipping a try, here’s some advice to keep in mind as you negotiate with possible partners.

Know your associates

If you’re considering working with dropshipping companies then you must be selling commodity items for which you’ve identified a reliable source. That could very well be the place to try drop shipping. Assuming you are satisfied with the quality of the products you sell, and how timely your supplier provides them, adding drop shipping to the mix carries fewer risks. Not only will you be working with a proven entity, but you’ll have a better opportunity for negotiating, since your supplier also knows and trusts you.

Leo Pucklis, a successful eBay seller for nearly 10 years, tells us, “You’re only as good as your drop shipper,” and clearly he’s right. Pucklis suggests you actually put your drop shipping partner to the test.

Sure, your supplier does fine sending your large orders out, but how will he handle the individual ones when you need him to?

Always order a few items from the drop shipper. Don’t just take their word for their speed, quality, or condition

“Always order a few different items from the drop shipper,” Pucklis recommends. “Don’t just take their word for their speed/quality/condition.” Doing this will not only give you a clear example of what your buyers will experience, but you’ll learn firsthand how quickly and efficiently your supplier completes his work.

“Does the item come well packed and unharmed? Does the drop shipper follow instructions? Did they send the correct item?” These are some of the questions Pucklis poses that can be answered by your own experience.

Testing dropshipping companies will not only help you spot potential problems that can be corrected before your customers even know about them; it will also help you plan for how you can deal with buyer disappointment, should you encounter it.

“People sometimes think that testing drop shippers could be a waste of money,” Pucklis explains. While he agrees shipping costs can add up, he finds this to be money well spent. “A few hundred bucks in shipping costs is a lot less disastrous than five or 10 angry buyers’ negative feedback,” he adds.

Work out the details before a crisis

“The best policy to deal with manufacturer and dropship suppliers is to address concerns with delays, defects and returns up front, at the beginning of the relationship,” recommends Andy Mowery of Debnroo on eBay.

Even the best supplier will ultimately make a mistake, and no matter how much care is involved, inevitably, an item will be damaged in shipping or arrive defective. Once that happens, the problem is two-fold from your viewpoint. You have a refund to deal with, and you have an angry customer. Your customer is going to view the failure as yours.

Your first challenge, of course, is to soothe your buyer’s anger. That may mean providing an automatic refund and then working out the details with your supplier. Nothing takes the fight out of your angry customer faster than a 100-percent refund. You’ll still have a disappointed buyer, but if you quickly and professionally treat that customer with compassion and respect, it doesn’t have to result in negative feedback.

Make it personal

Once you’ve identified a company as a good candidate with which to work out a drop shipping agreement, take that one step further and see if you can be assigned a dedicated account manager.

“Make sure you have a dedicated account manager that deals directly with you and handles your orders,” advises Shai Atanelov, CEO of Bigtimewireless.com. “This ensures reliable service, and reduces confusion and errors. This is especially true if you have specific package requirement or materials to include with every shipment.”

Each person we spoke with about drop shipping emphasized the need to have your supplier ship your orders with your labels, your invoices and according to your standards. Not all dropshipping companies are willing to do this, and that can be a big stumbling block, especially as you are building your drop shipping operation.

Spend some time documenting the delivery process with your drop shipper. Their mistakes can cost you customers

“The worst thing that can happen is for the customer to see the cost from the drop shipping company to the seller!” says Jerry Storey, operator of LearntoImport.com and an importer/exporter with more than 25 years of experience. “If my customers found out that my markup can be as high as 200 to 300 percent, they would be furious! This means you need to spend some time documenting the process for delivery with your drop shipper. Their mistakes can cost you customers!”

If your potential partner is unwilling to include your own labels, invoices and packing slips, it’s time to move on to find others who will.

Your customer is still your responsibility

It won’t matter to your customer where the item you sold comes from. As long as he receives what he thought he’d get within the time he expected to get it in, he isn’t going to care if you picked it off a shelf in your garage or had it shipped from a warehouse in Topeka.

Keeping your customer happy is ultimately your most important goal, and you’re the only one who can make certain that happens. That’s exactly why many eBay sellers would never consider risking their businesses with dropshipping companies.

But, there’s money to made in drop shipping, if it’s done carefully and with an eye toward smooth business partnerships and good customer care. If you’ve selected a supplier as dedicated to your customer satisfaction as you are to your customers’ happiness, you may be on target.

Be pre-emptive in facing disappointments and dissatisfaction. “Let the buyer know you have a seven- to 10-day shipping period,” eBay seller Pucklis recommends. “If the item takes longer, send the buyer a 10-percent discount on the item. Don’t make them ask.

“The more transparent and accommodating you are with a buyer,” he adds, “the less likely they are to assume you are trying to rip them off.”

Read Part 1 here.

About the author

Brad & Debra Schepp
Brad and Debra Schepp are the authors of 20 books, including eBay PowerSeller Secrets and The Official Alibaba.com Success Guide: Insider Tips and Strategies for Sourcing Products from the World's Largest B2B Marketplace. Their most recent book is How to Find a Job on LinkedIn, Facebook, Twitter and Google+. Brad is also a literary agent for Waterside Productions. For further information, visit the couple's website, bradanddeb.com. Opinions expressed here may not be shared by The Online Seller and/or its principals.



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